By Colin Twiggs
April 06, 2009 10:30 p.m. (12:30 p.m. AET)
Spot gold broke through the band of support at $900, after earlier breaking the rising trendline — indicating reversal of the last 4 months up-trend. Retracement that respects the new resisrtance level at $900 would confirm the down-trend, targeting primary support at $700. Spot silver breakout below $12 would add further confirmation.
Inflation is likely to remain muted in the next twelve months — easing demand for gold as an inflation hedge. Central bank attempts to expand the money supply are likely to be overwhelmed in the short/medium-term by the global credit contraction. We will continue to monitor bank credit growth, however, for signs of a reversal.
West Texas Crude failed to follow through after retreating below support at $50 per barrel,
reversing to again test $55.
Breakout above $55 would confirm the up-trend and target of $65 (calculated as
50 + [ 50 - 35 ]). Reversal below $47, while less likely, would test support at $35.
Spot silver penetration of support at $12 would signal a trend reversal, similar to gold. Retracement above $12.50, however, would warn of a bear trap.
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The US Dollar Index displays a large rising wedge pattern, warning of a reversal. The lower border, however, is not clearly defined until the index completes the turning point with a rise above 86. Downward breakout from the wedge would warn of a weak dollar — and upward pressure on gold.
To a mind that is still the whole universe surrenders.